Waltus merger objectors lose again but win costs

The objectors to last year’s merger of 27 Waltus property syndicates lost the last part of their court battle this week, although they did win the right to reasonable costs against the wishes of Waltus’ management.

Sunday, September 16th 2001, 9:10PM

by Jenny Ruth

Last year,
Master James Thomson of the High Court agreed with the objectors’
argument that it appeared that the management company, Waltus
Investments which is owned by the Hodge family, would pocket $2.95
million in pre-paid management fees if the $227 million merger
proceeded.

Given Waltus’ explanations delivered
at a hearing in June, "I am satisfied that there is no double
payment involved in the way first thought," Master Thomson
says in his judgement this week.

Last year, he said the matter had caused
him "real concern" and that "I think the objectors
criticisms on this issue are well made."

The Master’s view has changed radically.
"It has to be said that it was somewhat of an opportunist
submission made late in the original hearing," he says in
his latest judgement.

At the time each syndicate was formed, investors
paid a 3% management fee to cover 10-years worth of management.
The objectors argued that because some syndicates haven’t
existed for 10 years yet, their investors shouldn’t be charged
fees twice. The amounts range from zero for some syndicates to
$663,982. A new fee structure started from the date of the merger.

Waltus successfully argued that investors
were compensated through a variety of measures, including specific
fee reductions and the cancellation of promoter’s shares
in the syndicates, which had a total value of $2.58 million. That
and other concessions were worth more to the investors than the
prepaid fees, it claimed.

In any case, the prepaid fees were non-refundable
and were written off in the year they were received and so weren’t
an asset in the books of each syndicate.

On the matter of costs, Master Thomson says
the merger process was structured in a way which allowed any objectors
the right to be heard in court.

The fact that they were "greatly assisted
the Master in making his decision by testing the integrity of
the arrangement," he says.

"Further, I do not think, given the
massive task this exercise was for all involved, that the quantum
of costs claimed by the objectors is unreasonable and they are
ordered to be paid."